DALLAS -- Category management helped dollar sales per week soar 87% in the wine department at a Randalls store here.
The program has also boosted gross profit dollars per week 57.4% and the average retail price per unit by 12.43%, Tye Anthony, vice president of grocery merchandising, said at the Food Marketing Institute convention in Chicago.
Before the Houston-based retailer started the program, the 65,000-square-foot store #568 had at least 838 stockkeeping units in the wine department and was selling about 978 units from the mix per week. The section was averaging six turns per year.
But after category management, the SKU count dropped 25% to 626, and unit volume increased 66% to 1,627 units per week. The average turns per year soared 133% to 14, while the days of supply on hand was reduced 55% to 25.7.
"SKU rationalization is one of the greatest benefits of category management. In many cases, it disproves any theory that the consumer always acts negatively to a reduction in variety," Anthony said in a seminar entitled "An Introduction to Category Management." Anthony said there were several reasons why Randalls' program was successful. Among them: strategic definitions of category roles based on consumer needs and behaviors, planning flexibility (new company programs such as the "frequent shopper"), strategic alliances with vendors and information sources, continual development of personnel, frequent evaluation of results and performance and continued management support. Randalls' two-year-old category management initiative involves nine categories, including wine, laundry detergent, salty snacks, beer and paper products. A special staff runs the program, which operates in grocery, frozen and dairy. There currently are eight active category managers, with two more positions to be added soon. The retailer also has four category manager assistants and eventually plans to have six. It also has four replenishment buyers.
Preliminary Efforts: Get management commitment at all levels; analyze strengths and weaknesses; establish short- and long-term goals and choose a process to follow.
Step 1: Interview current personnel for category management capabilities; define category manager roles; classify needs for support tools for personnel and name a dedicated project leader.
Step 2: Define the role of the company in the marketplace and the roles of each category in the company, based on customer base, demographics and goals; and look at categories as individual, manageable, business units.
Step 3: Form a strategic alliance with ACNielsen; prep category analysts; create a space-management lab; and form strategic vendor partnerships. Category prioritization also begins here.
Step 4: Select initial categories to develop detailed plans for implementation; begin category manager training on tools and plan an individual interaction with category managers on creating plans.
Step 5: Review completed category plans; present plans to executive management and retail store management.
Step 6: Create and place retail merchandiser positions; develop long-term category review and merchandising task force; implement plans; begin category performance measurement process for completed category plans and define next group of priority categories.